Chrysler, Jeep maker issues big profit warning as it plans to slash U.S. inventory

By Steve Goldstein

Stellantis, which had forecast positive cash flow, now sees outflows up to EUR10 billion

Chrysler's parent company Stellantis on Monday said it's accelerating an inventory reduction program as it issued a massive downgrade to its financial guidance.

The maker of Chrysler, Jeep, and Dodge vehicles said it's brought forward a plan to reduce U.S. inventory levels to no more than 330,000, to the end of the year, from the first quarter of 2025.

It now expects North American shipment declines of more than 200,000 in the second half, from 100,000 previously, as it said it will increase incentives on both 2024 and older model year vehicles and cut costs and capacity.

Besides its own actions, Stellantis said it now has a lower 2024 market forecast as it also noted increasing competition from rising industry supplies and increased Chinese competition. Several automakers - notably Volkswagen on Friday night - have also issued profit warnings.

The Amsterdam-headquartered company now sees adjusted operating margin for the year between 5.5% and 7%, vs. a previous view of double digits, and industrial free cash flow between -EUR5 billion ($5.6 billion) and -EUR10 billion, vs. previous guidance of "positive."

Patrick Hummel, a UBS analyst who put his rating and stock price target under review, said the warning wasn't a surprise but the magnitude was, as he estimated sell-side revenue estimates are about 40% too high.

Stellantis's European-listed shares (IT:STLAM) (STLA) tumbled 15% and have now dropped 50% from the March peak.

Analysts at Equita, an Italian brokerage, estimate the stock is now trading at just 4 times 2025 earnings.

The moves come ahead of a possible strike from United Automobile Workers, and after it said last week it was searching for a replacement when the contract of CEO Carlos Tavares ends in 2026. The company did say one of its options would be to retain Tavares.

Shares in Volkswagen (XE:VOW3) , which issued a less severe profit warning of its own, fell 3%. The Stoxx 600 autos and parts index XX:SXAP has slumped 9% this year.

General Motors (GM) and Ford Motor (F) shares fell in premarket trade.

-Steve Goldstein

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09-30-24 0705ET

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